Exit Plan/ Entrepreneurship UK Deloitte Report

London this Summer seems a strange place – ominously quiet both from the point of view of the thin crowds of commuters and, from what I can tell, low level of business activity. A lot of people on vacation as there seems little point in hanging around thrashing for sales that aren’t there? Deloitte have published their Entrepreneurship UK survey (“starring” me and James Caan ha ha!) and of course it ain’t good news but shows in detail some of the symptoms of the crisis. We’ve got some roadshow sessions with business owners coming up and it will be instructive I think to hear their latest thoughts since the survey was completed and after this strange summer recess.

Now, the survey results are definitely worth a read as there are some really interesting insights in there. One that is worth noting is the sudden acceleration in people’s desire for an exit. Whereas last year plenty of people thought an exit would be found opportunistically or wasn’t even in the plan, this year it is very much on the agenda. Contrast that with a conversation with an entrepreneur I was with yesterday (a case study in progress!): he was always looking to make money from an exit and so from the very start was disciplined in creating such an opportunity. He knew for example that by taking significant venture funding that a simple calculation using expected returns got him to quite a large target valuation within a 7 year time-frame. Another calculation suggested that there was no way he could get that valuation based on ‘normal’ multiples of sales/ profit – his exit valuation had to be based on the price a strategic buyer would eventually pay. So the whole plan and its execution had to be based on a strategy that made that business highly desirable to a large Corporate able to pay a premium. He got it – in fact at twice the price his VC had at first accepted. This example is a solid reminder that if you don’t consider an eventual exit in your plan perhaps you don’t really have a strategy worth the name.

The other side of the survey data is of course that lots of owners have suddenly decided to exit the business so that must mean bargains for anyone looking to buy right? More anon on that topic…